PWBA: 401(k) Boosts Private Pension Plans

According to the report, assets held by private pension plans in 1996 totaled $3.1 trillion, a 15% increase from 1995’s totals. Defined contribution (DC) and defined benefit (DB) plans each totaled $1.6 trillion in assets, as DC assets rose 17% in 1996 and DB assets increased 13%.

401(k) type plans made up one-third of the pension plan universe, covered 45% of all active participants, and held 34% of all plan assets.

More 401(k)s

The total number of private pension plans increased slightly, from 693.400 to 696,200. DB plans continued their decade-long slippage, with the number declining another 8% to 63,700 plans in 1996. DC plans increased 1%, but 401(k) plans grew by 15%. Other DC plans actually decreased 5%, though some of that decline was the result of converting existing plans to 401(k) programs.

Fund Flows

DC Plans with 100 or more participants experienced a 15.0% aggregate rate of return, while enjoying a net new cash inflow of $16.2 billion (contributions less payments and expenses). On the other hand, while defined benefit plans experienced a near-identical 14.8% investment return, they endured a negative cash flow of $61.9 billion.

DB benefits paid increased 14% to $96.9 billion, while benefit payments from DC plans increased 19% to $116.5 billion. And while total contributions increased 7%, DB contributions slipped 14%, while DC plan contributions rose by a like percentage.

Nearly 2/3 (66%) of total employer and employee contributions made to 401(k) plans were made by employees.

Under Covered?

There was a 3% increase in the number of total active participants in private pension plans. The number of DC participants increased by 5%, while the number of DB participants slipped 1%. In 1996, an estimated 22% of workers were covered by a DB plan, versus 38% covered by a DC plan.

DB plan participation fell to 49% in 1996, while DC participation was estimated at 83%. Over half (51%) were covered by one or more DC plans, while nearly a third (32%) were covered by both a DB and DC plan. An estimated 65% of all pension covered workers were in a 401(k) plan in 1996.

The report is online at http://www.dol.gov/dol/pwba/public/programs/opr/bullet1996/cover.htm .

– Nevin Adams    editors@plansponsor.com  

ED NOTE: The Abstract of 1996 Form 5500 Annual Reports is based on data from 1996 Form 5500 filings. Reports for 1996 plan years were filed by plans for fiscal years ending anywhere from December 31, 1996 to December 30, 1997. The Internal Revenue Service (IRS) processed 1996 filings from August 1997 through July 1999.